Crude oil futures fell below $74 per barrel for the first time since early February. Brent crude oil futures fell nearly 3.5%, to the lowest level in nearly four months. Oil & gas analyst Javier Blas said that while OPEC+ has delayed production cuts, it is actually paving the way for increased production.
On Monday (June 3), during New York hours, international oil prices significantly decreased because OPEC+ measures implemented did not meet market expectations.
As of the time of publication, on the New York Mercantile Exchange, WTI crude oil futures fell more than 3.7% to $74.10 per barrel, dropping below $74 at one point during the day, the first time since early February; Brent crude oil futures also fell nearly 3.5% to $78.28 per barrel, the lowest level in nearly four months.
OPEC+ announced yesterday that eight member states have decided to extend voluntary production cuts of 2.2 million barrels per day until the end of September 2019, and gradually withdraw some of the production cuts depending on market conditions. In addition, voluntary production cuts announced in April last year of 1.65 million barrels per day will be extended until the end of 2025.
Oil and gas analyst Javier Blas stated that although OPEC+ has postponed production cuts, it is actually paving the way for increased production. In his opinion, by carefully examining the contents of the agreement, OPEC+ will be able to release more supply to the market starting in October and significantly increase supply next year.
According to the plan, by the end of this year, more than 500,000 barrels per day of supply will be reintroduced to the market, and by June 2025, 1.8 million barrels per day will be reintroduced to the market.
Helima Croft, RBC Capital Markets global head of commodity strategy, stated that some people believe that OPEC's announcement is bearish news for the oil market, based on the voluntary production cuts.
"If needed, we will adjust accordingly," said Saudi Energy Minister, "We are waiting for interest rates to drop, for global growth to improve, which could lead to more demand and have a clear path."
But Croft commented, "They are very clear that future oil production policies will depend on the data. By the end of August, if the fundamentals look worse than they do now, then they will pause the process of 'gradually withdrawing'."
Bob Yawger, a futures analyst at Mizuho, stated that the structure of the market is weakening. He explained that the market is worried that as supply returns to the market, prices will fall. OPEC+'s statement will make traders unwilling to buy oil futures that will be delivered later this year, "No one will buy November, no one will buy December. This will kill the December 2024 contract."
Yawger stated that oil prices of $100 per barrel are no longer possible unless a geopolitical crisis leads to a situation of "complete disaster" in the Persian Gulf or the Arabian Peninsula.
Andrew Lipow, president of Lipow Oil Associates, stated that this decision will limit the upside of crude oil prices. "Essentially, the amount they are releasing into the market is equal to OPEC's optimistic demand growth forecast for 2024. The result is that they are increasing ample supply to meet market expectations of growth."